Sunflowers buck oil’s negative price trend

A smaller 2017 sunflower crop and good demand are supporting prices.

Mar 09, 2018

By John Sandbakken

Nearby sunflower prices have hung in there and bucked the recent negative trend in oil values. A small 2017 U.S. sunflower crop and good demand are supporting seed prices. Most fundamental news for oil has been negative lately, with soybean oil and palm oil prices on the defensive. The cold weather in the U.S. this winter drove crush demand for soybean meal and pressured Chicago Board of Trade soyoil contracts as oil stocks started to build. Adding more price pressure has been surging palm oil production, which is way ahead of last year at this time.

Market analysts think this trend will reverse into the spring and summer months with oil prices strengthening as meal demand tapers off.

New crop sunflower prices are at a premium to old crop, as the industry tries to secure 2018 production after 2017’s small crop. The potential of tight ending seed stocks by the end of September has confection processors and oil crushers still offering 2018 new crop contracts. Crop budgets for 2018 are still showing both confectionary and oil sunflowers among the top-earners. All sunflower demand sectors are offering Act of God contracts for fall delivery. These “fail safe” contracts provide an opportunity to lock in attractive prices now for fall delivery and remove the price risk factor.

Crush plants are offering 2% price premium for each percentage point of oil above 40%. On sunflowers with 45% oil, the value of a $18.00 base contract is $19.80 per cwt.

Consistent demand for seed from crushers, birdfood and confection processors is expected in the final months of this marketing year. Argentine sunflower production is expected to be around 3.5 million metric tons. If realized, this would reduce the Argentine sunflower crush in 2018/19 significantly, thereby reducing exports of sunflower oil and meal. The shortfall in Argentine production, coupled with the smaller than expected 2017 Russian and Ukrainian sunflower crops, is giving some price premium to global sunflower seed and oil prices. It should support U.S. prices as well.

The main market mover this spring will be USDA's March Prospective Plantings report. Trade expectations about planted acreage will likely be in a wide range, but it seems reasonable to expect corn acreage to decrease and wheat and soybean to show an increase over 2017 levels. Oil and confection sunflower acres should show an increase. Once the report is out and factored into prices, the focus of the market will turn to growing season weather in the U.S.

Sandbakken is executive director of the National Sunflower Association.